**SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        D.C.  20549**
 
 **FORM
        10-Q**
 
 (Mark
        One)
  x
              Quarterly
                  Report under Section 13 or 15(d) of the Securities Exchange Act
                  of 1934
                  For the quarterly period ended June 30,
                  2007.
  
 or
  o
              Transition
                  Report under Section 13 or 15(d) of the Securities Exchange Act
                  of 1934
                  For
                  the transition period from _______________ to
                  ________________.
 
 Commission
        File No.  0-23980
 
 Southeastern
        Bank Financial Corporation
 (Exact
        name of registrant as specified in its charter)
 
 Georgia
              58-2005097(State
                  of Incorporation)
              (I.R.S.
                  Employer Identification No.)
 
 3530
        Wheeler Road, Augusta, Georgia 30909
 (Address
        of principal executive offices)
 
 (706)
        738-6990
 (Issuer's
        telephone number, including area code)
 
 Not
        Applicable
 (Former
        name, former address and former fiscal year, if changed since last
        report)
 
 Check
        whether the issuer: (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 12 months (or for such shorter
        period
        that the registrant was required to file such reports), and (2) has been
        subject
        to such filing requirements for the past 90
        days.  Yes  x     No  o
 
 Check
        whether the issuer is a large accelerated filer, an accelerated filer, or
        a
        non-accelerated filer.  See definition of “accelerated filer and large
        accelerated filer” in Rule 12b-2 of the Exchange Act.
 Large
                  accelerated filer o
              Accelerated
                  filer x
              Non-accelerated
                  filer o
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act):  YesoNox
 
 APPLICABLE
        ONLY TO CORPORATE ISSUERS
 
 State
        the
        number of shares outstanding of each of the issuer's classes of common equity,
        as of the latest practicable date:
 
 5,431,534
        shares of common stock, $3.00 par value per share, outstanding as of July
        31,
        2007.
 
  **SOUTHEASTERN
                  BANK FINANCIAL
                  CORPORATION****FORM
                  10-Q****INDEX****Page****Part
                  I**Item
                  1.
              Financial
                  Statements (Unaudited)Consolidated
                  Balance Sheets as of June 30, 2007 and December 31, 2006
              
              3Consolidated
                  Statements of Income for the Three and Six Months ended June 30,
                  2007 and
                  2006
              
              4Consolidated
                  Statements of Cash Flows for the  Six Months ended June 30, 2007
                  and 2006
              
              5Notes
                  to Consolidated Financial Statements
              
              6Item
                  2.
              Management’s
                  Discussion and Analysis of Financial Condition and
                  Results of Operations
              
              9Item
                  3.
              Quantitative
                  and Qualitative Disclosures about Market
                  Risk
              
              24Item
                  4.
              Controls
                  and Procedures
              
              24**Part
                  II**Other InformationItem
                  1.
              Legal
                  Proceedings
              
              *Item
                  1A.
              Risk
                  Factors
              
              25Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of
                  Proceeds
              
              25Item
                  3.
              Defaults
                  Upon Senior Securities
              
              *Item
                  4.
              Submission
                  of Matters to a Vote of Security
                  Holders
              
              26Item
                  5.
              Other
                  Information
              
              *Item
                  6.
              Exhibits
              
              27**Signature**
              
              
              28
 
 *
        No information submitted under this
        caption
  1
 *Index*
   PART
        I
 FINANCIAL
        INFORMATION
 
 
 2
 *Index*
  **SOUTHEASTERN
          BANK FINANCIAL CORPORATION AND SUBSIDIARIES**
 
 Consolidated
          Balance Sheets
 
 **June
                    30,****2007**
                
                
                **December
                    31,****Assets**
                
                **(Unaudited)**
                
                
                **2006**Cash
                    and due from banks
                
                $
                25,027,050
                
                
                $
                25,709,915Federal
                    funds sold
                
                
                21,322,000
                
                
                
                14,688,000Interest-bearing
                    deposits in other banks
                
                
                500,000
                
                
                
                512,690Cash
                    and cash equivalents
                
                
                46,849,050
                
                
                
                40,910,605Investment
                    securitiesAvailable-for-sale
                
                
                222,853,031
                
                
                
                199,135,716Held-to-maturity,
                    at cost (fair values of $1,974,288 and $3,048,196,
                    respectively)
                
                
                1,935,358
                
                
                
                2,970,619Loans
                    held for sale
                
                
                11,889,620
                
                
                
                14,857,315Loans
                
                
                797,706,559
                
                
                
                735,111,615Less
                    allowance for loan losses
                
                
                (11,133,435
                )
                
                
                (9,776,779
                )Loans,
                    net
                
                
                786,573,124
                
                
                
                725,334,836Premises
                    and equipment, net
                
                
                25,768,202
                
                
                
                23,402,588Accrued
                    interest receivable
                
                
                6,661,129
                
                
                
                5,982,654Bank-owned
                    life insurance
                
                
                16,307,789
                
                
                
                15,982,052Restricted
                    equity securities
                
                
                4,879,781
                
                
                
                4,936,281Other
                    assets
                
                
                9,601,218
                
                
                
                7,689,596$
                1,133,318,302
                
                
                $
                1,041,202,262**Liabilities
                    and Stockholders' Equity**DepositsNoninterest-bearing
                
                $
                110,247,395
                
                
                $
                106,846,160Interest-bearing:NOW
                    accounts
                
                
                125,090,049
                
                
                
                119,334,300Savings
                
                
                295,546,347
                
                
                
                255,065,766Money
                    management accounts
                
                
                54,700,645
                
                
                
                45,897,176Time
                    deposits over $100,000
                
                
                216,922,210
                
                
                
                193,860,714Other
                    time deposits
                
                
                95,604,566
                
                
                
                80,758,973898,111,212
                
                
                
                801,763,089Federal
                    funds purchased and securities sold under repurchase
                    agreements
                
                
                69,581,289
                
                
                
                70,019,551Advances
                    from Federal Home Loan Bank
                
                
                55,000,000
                
                
                
                60,000,000Other
                    borrowed funds
                
                
                1,000,000
                
                
                
                1,000,000Accrued
                    interest payable and other liabilities
                
                
                7,782,475
                
                
                
                9,495,498Subordinated
                    debentures
                
                
                20,000,000
                
                
                
                20,000,000Total
                    liabilities
                
                
                1,051,474,976
                
                
                
                962,278,138Stockholders'
                    equity:Common
                    stock, $3.00 par value; 10,000,000 shares authorized; 5,433,614
                    and
                    5,433,285 shares issued in 2007 and 2006, respectively; 5,431,734
                    and
                    5,432,854 shares outstanding in 2007 and 2006,
                    respectively
                
                
                16,300,842
                
                
                
                16,299,855Additional
                    paid-in capital
                
                
                39,238,901
                
                
                
                38,989,058Retained
                    earnings
                
                
                29,604,629
                
                
                
                25,287,006Treasury
                    stock, at cost; 1,880 and 431 shares in 2007 and 2006,
                    respectively
                
                
                (70,830
                )
                
                
                (16,809
                )Accumulated
                    other comprehensive loss, net
                
                
                (3,230,216
                )
                
                
                (1,634,986
                )Total
                    stockholders' equity
                
                
                81,843,326
                
                
                
                78,924,124$
                1,133,318,302
                
                
                $
                1,041,202,262
 
 See
          accompanying notes to consolidated financial statements.
 
 3
 *Index*
 
 **SOUTHEASTERN
          BANK FINANCIAL CORPORATION AND SUBSIDIARIES**
 
 Consolidated
          Statements of Income
 
 (Unaudited)
 
 **Three
                    Months Ended**
                
                
                **Six
                    Months Ended****June
                    30,**
                
                
                **June
                    30,****2007**
                
                
                **2006**
                
                
                **2007**
                
                
                **2006**Interest
                    income:Loans,
                    including fees
                
                $
                16,399,199
                
                
                $
                13,018,274
                
                
                $
                31,902,869
                
                
                $
                24,830,362Investment
                    securities
                
                
                2,921,476
                
                
                
                2,702,309
                
                
                
                5,532,810
                
                
                
                5,158,381Federal
                    funds sold
                
                
                315,503
                
                
                
                44,036
                
                
                
                681,585
                
                
                
                194,629Interest-bearing
                    deposits in other banks
                
                
                6,980
                
                
                
                5,675
                
                
                
                13,470
                
                
                
                13,650Total
                    interest income
                
                
                19,643,158
                
                
                
                15,770,294
                
                
                
                38,130,734
                
                
                
                30,197,022Interest
                    expense:Deposits
                
                
                8,164,890
                
                
                
                5,547,283
                
                
                
                15,657,083
                
                
                
                10,465,934Federal
                    funds purchased and securities sold under repurchase
                    agreements
                
                
                802,685
                
                
                
                724,846
                
                
                
                1,669,830
                
                
                
                1,408,754Other
                    borrowings
                
                
                1,188,987
                
                
                
                1,058,303
                
                
                
                2,263,726
                
                
                
                1,905,291Total
                    interest expense
                
                
                10,156,562
                
                
                
                7,330,432
                
                
                
                19,590,639
                
                
                
                13,779,979Net
                    interest income
                
                
                9,486,596
                
                
                
                8,439,862
                
                
                
                18,540,095
                
                
                
                16,417,043Provision
                    for loan losses
                
                
                1,030,389
                
                
                
                456,336
                
                
                
                1,606,187
                
                
                
                960,128Net
                    interest income after provision for loan losses
                
                
                8,456,207
                
                
                
                7,983,526
                
                
                
                16,933,908
                
                
                
                15,456,915Noninterest
                    income:Service
                    charges and fees on deposits
                
                
                1,581,451
                
                
                
                1,539,978
                
                
                
                2,978,467
                
                
                
                2,892,122Gain
                    on sales of loans
                
                
                1,320,377
                
                
                
                1,270,992
                
                
                
                2,604,655
                
                
                
                2,525,337Investment
                    securities gains, net
                
                
                -
                
                
                
                283,600
                
                
                
                33,191
                
                
                
                283,600Retail
                    investment income
                
                
                275,218
                
                
                
                216,562
                
                
                
                598,457
                
                
                
                383,973Trust
                    service fees
                
                
                284,906
                
                
                
                198,367
                
                
                
                558,442
                
                
                
                390,832Increase
                    in cash surrender value of bank-owned life insurance
                
                
                160,935
                
                
                
                149,973
                
                
                
                325,737
                
                
                
                289,243Miscellaneous
                    income
                
                
                160,861
                
                
                
                146,770
                
                
                
                328,540
                
                
                
                296,395Total
                    noninterest income
                
                
                3,783,748
                
                
                
                3,806,242
                
                
                
                7,427,489
                
                
                
                7,061,502Noninterest
                    expense:Salaries
                    and other personnel expense
                
                
                4,628,251
                
                
                
                4,505,040
                
                
                
                9,423,758
                
                
                
                8,945,020Occupancy
                    expenses
                
                
                742,442
                
                
                
                685,165
                
                
                
                1,502,786
                
                
                
                1,433,901Other
                    operating expenses
                
                
                2,223,365
                
                
                
                2,041,484
                
                
                
                4,490,300
                
                
                
                4,018,655Total
                    noninterest expense
                
                
                7,594,058
                
                
                
                7,231,689
                
                
                
                15,416,844
                
                
                
                14,397,576Income
                    before income taxes
                
                
                4,645,897
                
                
                
                4,558,079
                
                
                
                8,944,553
                
                
                
                8,120,841Income
                    tax expense
                
                
                1,674,956
                
                
                
                1,631,675
                
                
                
                3,214,332
                
                
                
                2,734,462Net
                    income
                
                $
                2,970,941
                
                
                $
                2,926,404
                
                
                $
                5,730,221
                
                
                $
                5,386,379Basic
                    net income per share
                
                $
                0.55
                
                
                $
                0.55
                
                
                $
                1.05
                
                
                $
                1.02Diluted
                    net income per share
                
                $
                0.54
                
                
                $
                0.55
                
                
                $
                1.04
                
                
                $
                1.01Weighted
                    average common shares outstanding
                
                
                5,432,476
                
                
                
                5,279,333
                
                
                
                5,433,054
                
                
                
                5,276,526Weighted
                    average number of common and common equivalent shares
                    outstanding
                
                
                5,499,666
                
                
                
                5,331,632
                
                
                
                5,501,470
                
                
                
                5,329,007
 
 See
          accompanying notes to consolidated financial statements.
 
 4
 *Index*
 **SOUTHEASTERN
            BANK FINANCIAL CORPORATION AND SUBSIDIARIES**
 
 Consolidated
            Statements of Cash Flows
 
 (Unaudited)
 
 **Six
                      Months Ended June 30,****2007**
                  
                  
                  **2006**Cash
                      flows from operating activities:Net
                      income
                  
                  $
                  5,730,221
                  
                  
                  $
                  5,386,379Adjustments
                      to reconcile net income to net cash provided by operating
                      activitiesDepreciation
                  
                  
                  729,628
                  
                  
                  
                  720,553Provision
                      for loan losses
                  
                  
                  1,606,187
                  
                  
                  
                  960,128Net
                      investment securities gains
                  
                  
                  (33,191
                  )
                  
                  
                  (283,600
                  )Net
                      (accretion of discount) amortization of premium on investment
                      securities
                  
                  
                  (110,702
                  )
                  
                  
                  (167,840
                  )Increase
                      in CSV of bank owned life insurance
                  
                  
                  (325,737
                  )
                  
                  
                  (289,243
                  )Stock
                      options compensation cost
                  
                  
                  267,603
                  
                  
                  
                  258,890Loss
                      (Gain) on disposal of premises and equipment
                  
                  
                  42,983
                  
                  
                  
                  (91,834
                  )Gain
                      on sales of loans
                  
                  
                  (2,604,655
                  )
                  
                  
                  (2,525,337
                  )Real
                      estate loans originated for sale
                  
                  
                  (133,166,370
                  )
                  
                  
                  (136,105,604
                  )Proceeds
                      from sales of real estate loans
                  
                  
                  138,738,720
                  
                  
                  
                  140,676,591Increase
                      in accrued interest receivable
                  
                  
                  (678,475
                  )
                  
                  
                  (151,270
                  )Increase
                      in other assets
                  
                  
                  (355,030
                  )
                  
                  
                  (339,948
                  )(Decrease)
                      increase in accrued interest payable and other liabilities
                  
                  
                  (1,713,024
                  )
                  
                  
                  199,627Net
                      cash provided by operating activities
                  
                  
                  8,128,158
                  
                  
                  
                  8,247,492Cash
                      flows from investing activities:Proceeds
                      from sales of available for sale securities
                  
                  
                  -
                  
                  
                  
                  15,729,239Proceeds
                      from maturities of available for sale securities
                  
                  
                  30,270,483
                  
                  
                  
                  22,151,932Proceeds
                      from maturities of held to maturity securities
                  
                  
                  1,045,350
                  
                  
                  
                  500,000Purchase
                      of available for sale securities
                  
                  
                  (56,713,297
                  )
                  
                  
                  (44,778,338
                  )Purchase
                      of Federal Home Loan Bank stock
                  
                  
                  (168,500
                  )
                  
                  
                  (873,800
                  )Proceeds
                      from redemption of FHLB stock
                  
                  
                  225,000
                  
                  
                  
                  225,000Net
                      increase in loans
                  
                  
                  (63,185,250
                  )
                  
                  
                  (60,311,450
                  )Purchase
                      of Bank-owned life insurance
                  
                  
                  -
                  
                  
                  
                  (3,500,000
                  )Additions
                      to premises and equipment
                  
                  
                  (3,148,243
                  )
                  
                  
                  (3,061,294
                  )Proceeds
                      from sale of other real estate
                  
                  
                  48,256
                  
                  
                  
                  -Proceeds
                      from sale of premises and equipment
                  
                  
                  10,018
                  
                  
                  
                  1,770,651Net
                      cash used in investing activities
                  
                  
                  (91,616,183
                  )
                  
                  
                  (72,148,060
                  )Cash
                      flows from financing activities:Net
                      increase in deposits
                  
                  
                  96,348,122
                  
                  
                  
                  65,982,787Net
                      decrease in federal funds purchased and securities sold under
                      repurchase
                      agreements
                  
                  
                  (438,262
                  )
                  
                  
                  (12,609,226
                  )Advances
                      from Federal Home Loan Bank
                  
                  
                  -
                  
                  
                  
                  19,000,000Payments
                      of Federal Home Loan Bank advances
                  
                  
                  (5,000,000
                  )
                  
                  
                  (11,000,000
                  )Proceeds
                      from subordinated debentures
                  
                  
                  -
                  
                  
                  
                  10,000,000Principal
                      payments on other borrowed funds
                  
                  
                  -
                  
                  
                  
                  (600,000
                  )Purchase
                      of treasury stock
                  
                  
                  (70,830
                  )
                  
                  
                  (31,146
                  )Payment
                      of cash dividends
                  
                  
                  (1,412,597
                  )
                  
                  
                  (1,372,090
                  )Proceeds
                      from stock options exercised
                  
                  
                  37
                  
                  
                  
                  176,124Net
                      cash provided by financing activities
                  
                  
                  89,426,470
                  
                  
                  
                  69,546,449Net
                      increase in cash and cash equivalents
                  
                  $
                  5,938,445
                  
                  
                  $
                  5,645,881Cash
                      and cash equivalents at beginning of period
                  
                  
                  40,910,605
                  
                  
                  
                  22,563,056Cash
                      and cash equivalents at end of period
                  
                  $
                  46,849,050
                  
                  
                  $
                  28,208,937Supplemental
                      disclosures of cash paid during the period for:Interest
                  
                  $
                  19,931,087
                  
                  
                  $
                  13,165,019Income
                      taxes
                  
                  $
                  2,491,847
                  
                  
                  $
                  3,255,000Supplemental
                      information on noncash investing activities:Loans
                      transferred to other real estate
                  
                  $
                  340,775
                  
                  
                  $
                  -
  See
            accompanying notes to consolidated financial
            statements.
  5
 *Index*
  SOUTHEASTERN
        BANK FINANCIAL CORPORATION AND SUBSIDIARIES
 
 Notes
        to
        Consolidated Financial Statements
 
 June
        30,
        2007
 
 Note
        1 -
        Basis of Presentation
 
 The
        accompanying consolidated financial statements include the accounts of
        Southeastern Bank Financial Corporation (the “Company”, and its wholly-owned
        subsidiaries, Georgia Bank & Trust Company (the “Bank”) and Southern Bank
& Trust (the “Thrift”).  Significant intercompany transactions and
        accounts are eliminated in consolidation.
 
 The
        financial statements for the three and six months ended June 30, 2007 and
        2006
        are unaudited and have been prepared pursuant to the rules and regulations
        of
        the Securities and Exchange Commission.  Certain information and
        footnote disclosures normally included in financial statements prepared in
        accordance with accounting principles generally accepted in the United States
        of
        America have been condensed or omitted pursuant to such rules and
        regulations.  These consolidated financial statements should be read
        in conjunction with the audited consolidated financial statements and footnotes
        included in the Company's annual report on Form 10-K for the year ended December
        31, 2006.
 
 In
        the
        opinion of management, all adjustments necessary to present fairly the financial
        position and the results of operations and cash flows for the interim periods
        have been made.  All such adjustments are of a normal recurring
        nature.  The results of operations for the three and six months ended
        June 30, 2007 are not necessarily indicative of the results of operations
        which
        the Company may achieve for the entire year.
 
 Some
        items in the prior period financial statements were reclassified to conform
        to
        the current presentation.
 
 Note
        2 –
Comprehensive Income
 
 Other
        comprehensive income for the Company consists of net unrealized gains and
        losses
        on investment securities available for sale.  Total comprehensive
        income for the three months ended June 30, 2007 was $647,000 compared to
        $806,000 for the three months ended June 30, 2006.  Total
        comprehensive income for the six months ended June 30, 2007 was $4,135,000
        compared to $3,651,000 for the six months ended June 30, 2006.
 
 Note
        3 –
Cash Dividend Declared
 
 On
        April
        25, 2007, the Company declared a quarterly cash dividend of $0.13 per share
        on
        outstanding shares.  The dividend was paid on May 21, 2007 to
        shareholders of record as of May 9, 2007.
 
 6
 *Index*
 
 On
        July
        23, 2007, the Company declared a quarterly cash dividend of $0.13 per share
        on
        outstanding shares.  The dividend is payable on August 22, 2007 to
        shareholders of record as of August 10, 2007.
 
 Note
        4 –
Unrealized Losses on Investment Securities
 
 Available
        for Sale securities are carried at fair market value with related unrealized
        gains or losses included in stockholders’ equity as accumulated other
        comprehensive income.  Unrealized losses have not been recognized into
        income because the issuers are either obligations of the U.S. government
        or are
        of high credit quality.  Also, the decline in fair value is largely
        due to changes in interest rates and the fair value is expected to recover
        as
        the obligations approach maturity.
 
 Note
        5 -
        Recently Issued Accounting Standards on the Financial Statements
 
 In
        September 2006, the FASB issued Statement No. 157, *Fair Value
        Measurements*.  This Statement defines fair value, establishes a
        framework for measuring fair value and expands disclosures about fair value
        measurements.  This Statement establishes a fair value hierarchy about
        the assumptions used to measure fair value and clarifies assumptions about
        risk
        and the effect of a restriction on the sale or use of an asset.  The
        standard is effective for fiscal years beginning after November 15,
        2007.  The Company has not completed its evaluation of the impact of
        the adoption of this standard.
 
 In
        September 2006, the FASB Emerging Issues Task Force finalized Issue No. 06-5,
        *Accounting for Purchases of Life Insurance - Determining the Amount
        That
        Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4
        (Accounting for Purchases of Life Insurance).*This issue requires that a
        policyholder consider contractual terms of a life insurance policy in
        determining the amount that could be realized under the insurance
        contract.  It also requires that if the contract provides for a
        greater surrender value if all individual policies in a group are surrendered
        at
        the same time, that the surrender value be determined based on the assumption
        that policies will be surrendered on an individual basis.  Lastly, the
        issue discusses whether the cash surrender value should be discounted when
        the
        policyholder is contractually limited in its ability to surrender a
        policy.  This issue is effective for fiscal years beginning after
        December 15, 2006.  The Company does not have any of the above
        mentioned consideration in the Company’s life insurance policies.
 
 The
        Company does not expect that the following newly issued accounting standards
        will have a material effect on the financial statements when adopted in future
        years.  In general, these standards revise the accounting for
        derivatives embedded in other financial instruments for 2007, revise the
        recognition and accounting for servicing of financial assets for 2007, and
        revise the accrual of post-retirement benefits associated with providing
        split-dollar life insurance for 2008.  The Company did not have any of
        these assets or liabilities as of June 30, 2007.
 
 7
 *Index*
 
 The
        Company adopted the provisions of FASB Interpretation No. 48, *Accounting for
        Uncertainty in Income Taxes* (“FIN 48”)*,*on January 1,
        2007.  The adoption of FIN 48 had no affect on the Company’s financial
        statements. The Company has no unrecognized tax benefits and does not anticipate
        any increase in unrecognized benefits during 2007 relative to any tax positions
        taken prior to January 1, 2007.  Should the accrual of any interest or
        penalties relative to unrecognized tax benefits be necessary, it is the
        Company’s policy to record such accruals in its income taxes accounts; no such
        accruals exist as of January 1, 2007.  The Company and its
        subsidiaries file a consolidated U.S. federal income tax return and files
        in the
        state of Georgia.  These returns are subject to examination by taxing
        authorities for all years after 2002.
 
 In
        February 2007 the FASB issued Statement of Financial Accounting Standard (“SFAS”)
        No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.”
SFAS No. 159 permits entities to choose to measure many financial instruments
        and certain other items at fair value with an objective of improving financial
        reporting by providing entities with the opportunity to mitigate volatility
        in
        reported earnings caused by measuring related assets and liabilities differently
        without having to apply complex hedge accounting provisions. The provisions
        of
        SFAS No. 159 are effective as of the beginning of an entity’s first fiscal year
        that begins after November 15, 2007.  Management is currently
        evaluating the impact, if any, that adoption of SFAS No. 159 will have on
        the
        Company’s financial position, results of operations and liquidity.
 
 8
 *Index*
 
 **Item
                  2.**
              **Management’s
                  Discussion and Analysis of Financial Condition and Results of
                  Operations**
 
 Overview
 
 Southeastern
        Bank Financial Corporation (the “Company”) operates two wholly-owned
        subsidiaries in the Augusta-Richmond County, GA-SC metropolitan
        area.  Georgia Bank & Trust Company (the “Bank”) was organized by
        a group of local citizens and commenced business on August 28, 1989, with
        one
        branch location.  Today, it is Augusta’s largest community banking
        company operating nine full service branches in Augusta, Martinez, and Evans,
        Georgia and one branch in Athens, Georgia.  A new full service branch
        was opened in Evans, Georgia on July 9, 2007.  Mortgage origination
        offices are located in Augusta, Savannah and Athens,
        Georgia.  Southern Bank & Trust (the “Thrift), a federally
        chartered thrift, opened its main office in Aiken, South Carolina on September
        12, 2006.  A new branch has been approved by the Office of the Thrift
        Supervision and is expected to open on August 13, 2007 in North Augusta,
        South
        Carolina.
 
 The
        Company’s primary market includes Richmond and Columbia Counties in Georgia and
        Aiken County in South Carolina, all part of the Augusta-Richmond County,
        GA-SC
        metropolitan statistical area (MSA).
 
 The
        Company’s services include the origination of residential and commercial real
        estate loans, construction and development loans, and commercial and consumer
        loans.  The Company also offers a variety of deposit programs,
        including noninterest-bearing demand, interest checking, money management,
        savings, and time deposits.  In the Augusta-Richmond County, GA-SC
        metropolitan area, GB&T had 12.34% of all deposits and was the second
        largest depository institution at June 30, 2006, as cited from the Federal
        Deposit Insurance Corporation’s website.  Securities sold under
        repurchase agreements are also offered.  Additional services include
        wealth management, trust, retail investment, and mortgage.  As a
        matter of practice, most mortgage loans are sold in the secondary market;
        however, some mortgage loans are placed in the portfolio based on
        asset/liability management strategies.  The Company continues to
        concentrate on increasing its market share through various new deposit and
        loan
        products and other financial services and by focusing on the customer
        relationship management philosophy.  The Company is committed to
        building life-long relationships with its customers, employees, shareholders,
        and the communities it serves.
 
 The
        Company’s primary source of income is from its lending activities followed by
        interest income from its investment activities, service charges and fees
        on
        deposits, and gain on sales of mortgage loans in the secondary
        market.  Interest income on loans and investment securities increased
        during the first six months of 2007 as compared to the first six months of
        2006
        due to higher interest rates and increased volumes.  Retail investment
        income increased due to higher volume and additional brokers.  Trust
        service fees increased due to higher volume.
 
 9
 *Index*
  **Table
                    1 - Selected Financial Data****June
                    30,**
                
                
                **December
                    31,**
                
                
                **December
                    31,****2007**
                
                
                **2006**
                
                
                **2002**(Dollars
                    in thousands)Assets
                
                $
                1,133,318
                
                
                $
                1,041,202
                
                
                $
                569,832Loans
                
                
                809,596
                
                
                
                749,969
                
                
                
                396,699Deposits
                
                
                898,111
                
                
                
                801,763
                
                
                
                439,557Return
                    on average total assets
                
                
                1.06
                %
                
                
                1.10
                %
                
                
                1.14
                %Return
                    on average equity
                
                
                14.19
                %
                
                
                14.69
                %
                
                
                13.95
                %
 
 The
        Company continues to experience steady growth as evidenced in Table 1
        above.  The Company has also achieved significant increases in loans
        and deposits and continues to provide strong returns on assets and equity
        as
        noted in the table above.  Net income for the year ended 2002 was $6.0
        million compared to net income of $11.2 million at year end 2006.  Net
        income for the six months ended June 30, 2007 was $5.7 million.  The
        Company has paid cash dividends of $0.13 per share paid each quarter since
        2004.
 
 The
        Company meets its liquidity needs by managing cash and due from banks, federal
        funds purchased and sold, maturity of investment securities, principal
        repayments from mortgage-backed securities, and draws on lines of
        credit.  Additionally, liquidity can be managed through structuring
        deposit and loan maturities.  The Company funds loan and investment
        growth with core deposits, securities sold under repurchase agreements and
        Federal Home Loan Bank advances.  During inflationary periods,
        interest rates generally increase and operating expenses generally
        rise.  When interest rates rise, variable rate loans and investments
        produce higher earnings; however, deposit and other borrowings interest expense
        also rise.  The Company monitors its interest rate risk as it applies
        to net income in a ramp up and down annually 200 basis points (2%) scenario
        and
        as it applies to economic value of equity in a shock up and down 200 (2%)
        basis
        points scenario.  The Company monitors operating expenses through
        responsibility center budgeting.
 
 Forward-Looking
        Statements
 
 Southeastern
        Bank Financial Corporation may, from time to time, make written or oral
        forward-looking statements, including statements contained in the Company’s
        filings with the Securities and Exchange Commission (the “Commission”) and its
        reports to shareholders.  Statements made in such documents, other
        than those concerning historical information, should be considered
        forward-looking and subject to various risks and uncertainties.  Such
        forward-looking statements are made based upon management’s belief as well as
        assumptions made by, and information currently available to, management pursuant
        to “safe harbor” provisions of the Private Securities Litigation Reform Act of
        1995.  The Company’s actual results may differ materially from the
        results anticipated in forward-looking statements due to a variety of factors,
        including unanticipated changes in the Company’s local economy, the national
        economy, governmental monetary and fiscal policies, deposit levels, loan
        demand,
        loan collateral values and securities portfolio values; difficulties in interest
        rate risk management; the effects of competition in the banking business;
        difficulties in expanding the Company’s business into new markets; changes in
        governmental regulation relating to the banking industry, including regulations
        relating to branching and acquisitions; failure of assumptions underlying
        the
        establishment of reserves for loan losses, including the value of collateral
        underlying delinquent loans; and other factors.  The Company cautions
        that such factors are not exclusive.  The Company does not undertake
        to update any forward-looking statement that may be made from time to time
        by,
        or on behalf of, the Company.
 
 10
 *Index*
 
 Critical
        Accounting Estimates
 
 The
        accounting and financial reporting policies of the Company and its subsidiaries
        conform to accounting principles generally accepted in the United States
        of
        America and to general practices within the banking industry.  Of
        these policies, management has identified the allowance for loan losses as
        a
        critical accounting estimate that requires difficult, subjective judgment
        and is
        important to the presentation of the financial condition and results of
        operations of the Company.
 
 The
        allowance for loan losses is established through a provision for loan losses
        charged to expense, which affects the Company’s earnings
        directly.  Loans are charged against the allowance for loan losses
        when management believes that the collectibility of the principal is
        unlikely.  Subsequent recoveries are added to the
        allowance.  The allowance is an amount that management believes will
        be adequate to absorb losses on existing loans that become uncollectible,
        based
        on evaluations of the collectibility of loans.  The evaluations take
        into consideration such factors as changes in the nature and volume of the
        loan
        portfolio, historical loss rates, overall portfolio quality, review of specific
        problem loans, and current economic conditions and trends that may affect
        a
        borrower’s  ability to repay.
 
 The
        Company segments its allowance for loan losses into the following three major
        categories: 1) identified losses for impaired loans; 2) general allocation
        for
        Classified/Watch loans; and 3) general allocation for loans with satisfactory
        ratings.  Risk ratings are initially assigned in accordance with the
        Company’s loan and collection policy.  An organizationally independent
        department reviews grade assignments on an ongoing basis.  Management
        reviews current information and events regarding a borrower’s financial
        condition and strengths, cash flows available for debt repayment, the related
        collateral supporting the loan and the effects of known and expected economic
        conditions.  When the evaluation reflects a greater than normal risk
        associated with the individual loan, management classifies the loan
        accordingly.  If the loan is determined to be impaired, management
        allocates a portion of the allowance for loan losses for that loan based
        upon
        the present value of future cash flows discounted at the loan’s effective
        interest rate, or the fair value of the collateral if collection of the loan
        is
        deemed to be dependent upon the collateral.  Regulatory guidance is
        also considered.  Cash receipts for accruing loans are applied to
        principal and interest under the contractual terms of the loan agreement;
        however, cash receipts on impaired and nonaccrual loans for which the accrual
        of
        interest has been discontinued are generally applied first to principal and
        then
        to interest income depending upon the overall risk of principal loss to the
        Company.  Impaired and Classified/Watch loans are aggressively
        monitored.  The allocation for loans rated satisfactory is further
        subdivided into various types of loans as defined by regulatory reporting
        codes.  The Company’s management also gives consideration to
        subjective factors such as, national and local economic conditions, bankruptcy
        trends, unemployment trends, loan concentrations, and competitive factors
        in the
        local market.  These factors represent uncertainties in the Company’s
        business environment and are included in the various individual components
        of
        the allowance for loan losses.
 
 11
 *Index*
 
 Performance
        Overview -- Net Income
 
 The
        Company’s net income for the second quarter of 2007 was $3.0 million, which was
        an increase of $45,000 (1.5%) compared to net income of $2.9 million for
        the
        second quarter of 2006.  Diluted net income per share for the three
        months ended June 30, 2007 was $0.54 compared to $0.55 for the three months
        ended June 30, 2006.  Net income for the first six months of 2007 was
        $5.7 million, an increase of $344,000 (6.4%) compared with net income of
        $5.4
        million for the first six months of 2006.  The increase in net income
        for the three and six months ended June 30, 2007 as compared with the three
        and
        six months ended June 30, 2006, was primarily a result of increases in net
        interest income, somewhat offset by increases in noninterest expense and
        provision for loan losses.  Interest income on both loans and
        investment securities increased due to increased volumes and higher interest
        rates.  Interest expense on deposits, securities sold under repurchase
        agreements and other borrowings increased as a result of higher volumes and
        increase in interest rates.  The loan loss provision increased
        primarily due to loan volume growth which was facilitated by the opening
        of
        Southern Bank & Trust in September 2006.  Factors contributing to
        the increase in noninterest income for the six months ended June 30, 2007,
        were
        primarily due to an increase in retail investment income and trust services
        fees
        resulting from increased staff in the Wealth Management area somewhat offset
        by
        a decrease in investment securities (losses) gains, net due to a $526,000
        gain
        recognized on the sale of equity securities in May 2006, partially offset
        by
        losses on the sale of agency securities.  Increases in cash surrender
        value of bank owned life insurance was primarily due to the purchase of
        additional policies in February 2006 and increases in interest
        rates.  Noninterest expense increased during the three and six months
        ended June 30, 2007 compared to the same periods ended June 30, 2006, primarily
        due to increases in salaries, employee benefits, occupancy expense and other
        operating expenses.  Significant changes in other operating expenses
        during the three and six month periods include increases in processing expense,
        marketing expense, IT maintenance expense, professional fees, contributions,
        and
        gain/loss on sale of fixed assets.
 
 12
 *Index*
  **Table
                    2 - Selected Balance Sheet Data****June
                    30,**
                
                
                **December
                    31,**
                
                
                **Variance****2007**
                
                
                **2006**
                
                
                **Amount**
                
                
                **%**(Dollars
                    in thousands)Cash
                    and due from banks
                
                $
                25,027
                
                
                $
                25,710
                
                
                $
                (683
                )
                
                
                (2.7
                %)Federal
                    funds sold
                
                
                21,322
                
                
                
                14,688
                
                
                
                6,634
                
                
                
                45.2
                %Investment
                    securities
                
                
                224,789
                
                
                
                202,106
                
                
                
                22,683
                
                
                
                11.2
                %Loans
                
                
                809,596
                
                
                
                749,969
                
                
                
                59,627
                
                
                
                8.0
                %Assets
                
                
                1,133,318
                
                
                
                1,041,202
                
                
                
                92,116
                
                
                
                8.8
                %Deposits
                
                
                898,111
                
                
                
                801,763
                
                
                
                96,348
                
                
                
                12.0
                %Securities
                    sold under repurchase agreements
                
                
                69,581
                
                
                
                70,020
                
                
                
                (439
                )
                
                
                (0.6
                %)Liabilities
                
                
                1,051,475
                
                
                
                962,278
                
                
                
                89,197
                
                
                
                9.3
                %Stockholders'
                    equity
                
                
                81,843
                
                
                
                78,924
                
                
                
                2,919
                
                
                
                3.7
                %
  Table
        2
        highlights significant changes in the balance sheet at June 30, 2007 as compared
        to December 31, 2006.  Assets increased $92.1 million, primarily the
        result of higher balances for loans and investment securities.  The
        increase in assets was funded by the increase in deposits of $96.3 million
        somewhat offset by a $5.0 million decrease in Federal Home Loan Bank
        borrowings.  Net income of $5.7 million less dividends paid of $1.4
        million also contributed to the funding.
 
 The
        annualized return on average assets for the Company was 1.06% for the six
        months
        ended June 30, 2007, compared to 1.20% for the same period last
        year.  While total assets have increased $92.1 million since second
        quarter 2006, net income has only increased $44,000 resulting in a decrease
        in
        ROA.  The annualized return on average stockholders’ equity was 14.19%
        for the six months ended June 30, 2007, compared to 16.47% for the same period
        last year.  The decrease is primarily attributable to the issuance of
        common stock and the related increase in additional paid in capital, the
        increase in retained earnings due to net income and decreases in accumulated
        other comprehensive income.
 
 Net
        Interest Income
 
 The
        primary source of earnings for the Company is net interest income, which
        is the
        difference between income on interest-earning assets, such as loans and
        investment securities, and interest expense incurred on interest-bearing
        sources
        of funds, such as deposits and borrowings.  The following table shows
        the average balances of interest-earning assets and interest-bearing
        liabilities, annualized average yields earned and rates paid on those respective
        balances, and the actual interest income and interest expense for the periods
        indicated.  Average balances are calculated based on daily balances,
        yields on non-taxable investments are not reported on a tax equivalent basis
        and
        average balances for loans include nonaccrual loans even though interest
        was not
        earned.
 
 13
 *Index*
  **Table
                    3 - Average Balances, Income and Expenses, Yields and
                    Rates****Three
                    Months Ended June 30, 2007**
                
                
                **Three
                    Months Ended June 30, 2006****Average
                    Amount**
                
                
                **Annualized
                    Average Yield or Rate**
                
                
                **Amount
                    Paid or Earned**
                
                
                **Average
                    Amount**
                
                
                **Annualized
                    Average Yield or Rate**
                
                
                **Amount
                    Paid or Earned***(Dollars
                    in thousands)***Interest-earning
                    assets:**Loans
                
                $
                792,449
                
                
                
                8.22
                %
                
                $
                16,399
                
                
                $
                643,862
                
                
                
                8.03
                %
                
                $
                13,018Investment
                    securities
                
                
                227,454
                
                
                
                5.14
                %
                
                
                2,921
                
                
                
                219,279
                
                
                
                4.93
                %
                
                
                2,702Federal
                    funds sold
                
                
                23,177
                
                
                
                5.46
                %
                
                
                316
                
                
                
                3,665
                
                
                
                4.83
                %
                
                
                44Interest-bearing
                    deposits in other banks
                
                
                511
                
                
                
                5.48
                %
                
                
                7
                
                
                
                512
                
                
                
                4.49
                %
                
                
                6Total
                    interest-earning assets
                
                $
                1,043,591
                
                
                
                7.48
                %
                
                $
                19,643
                
                
                $
                867,318
                
                
                
                7.23
                %
                
                $
                15,770**Interest-bearing
                    liabilities:**Deposits
                
                $
                769,266
                
                
                
                4.26
                %
                
                $
                8,165
                
                
                $
                608,932
                
                
                
                3.65
                %
                
                $
                5,547Federal
                    funds purchased / securities sold under repurchase
                    agreements
                
                
                61,431
                
                
                
                5.24
                %
                
                
                803
                
                
                
                59,724
                
                
                
                4.87
                %
                
                
                725Other
                    borrowings
                
                
                78,479
                
                
                
                6.08
                %
                
                
                1,189
                
                
                
                76,065
                
                
                
                5.58
                %
                
                
                1,058Total
                    interest-bearing liabilities
                
                $
                909,176
                
                
                
                4.48
                %
                
                $
                10,157
                
                
                $
                744,721
                
                
                
                3.95
                %
                
                $
                7,330**Net
                    interest margin/income:**
                
                
                
                
                
                
                3.58
                %
                
                $
                9,486
                
                
                
                
                
                
                
                3.84
                %
                
                $
                8,440
  **Table
                    4 - Average Balances, Income and Expenses, Yields and
                    Rates****Six
                    Months Ended June 30, 2007**
                
                
                **Six
                    Months Ended June 30, 2006****Average
                    Amount**
                
                
                **Annualized
                    Average Yield or Rate**
                
                
                **Amount
                    Paid or Earned**
                
                
                **Average
                    Amount**
                
                
                **Annualized
                    Average Yield or Rate**
                
                
                **Amount
                    Paid or Earned***(Dollars
                    in thousands)***Interest-earning
                    assets:**Loans
                
                $
                776,823
                
                
                
                8.20
                %
                
                $
                31,903
                
                
                $
                625,967
                
                
                
                7.92
                %
                
                $
                24,830Investment
                    securities
                
                
                216,130
                
                
                
                5.12
                %
                
                
                5,533
                
                
                
                212,726
                
                
                
                4.85
                %
                
                
                5,158Federal
                    funds sold
                
                
                26,138
                
                
                
                5.26
                %
                
                
                682
                
                
                
                8,750
                
                
                
                4.48
                %
                
                
                195Interest-bearing
                    deposits in other banks
                
                
                512
                
                
                
                5.27
                %
                
                
                13
                
                
                
                714
                
                
                
                3.92
                %
                
                
                14Total
                    interest-earning assets
                
                $
                1,019,603
                
                
                
                7.47
                %
                
                $
                38,131
                
                
                $
                848,157
                
                
                
                7.11
                %
                
                $
                30,197**Interest-bearing
                    liabilities:**Deposits
                
                $
                744,111
                
                
                
                4.24
                %
                
                $
                15,657
                
                
                $
                599,968
                
                
                
                3.52
                %
                
                $
                10,466Federal
                    funds purchased / securities sold under repurchase
                    agreements
                
                
                64,046
                
                
                
                5.26
                %
                
                
                1,670
                
                
                
                61,300
                
                
                
                4.63
                %
                
                
                1,409Other
                    borrowings
                
                
                79,531
                
                
                
                5.74
                %
                
                
                2,264
                
                
                
                69,059
                
                
                
                5.56
                %
                
                
                1,905Total
                    interest-bearing liabilities
                
                $
                887,688
                
                
                
                4.45
                %
                
                $
                19,591
                
                
                $
                730,327
                
                
                
                3.80
                %
                
                $
                13,780**Net
                    interest margin/income:**
                
                
                
                
                
                
                3.59
                %
                
                $
                18,540
                
                
                
                
                
                
                
                3.84
                %
                
                $
                16,417
 
 14
 *Index*
 
 Net
        interest income increased $1.0 million (12.4%) during the three-month period
        and
        $2.1 million (12.9%) during the six-month period as compared to the same
        period
        in 2006.  Loan interest income increased $3.4 million and $7.1 million
        in the three and six month periods, respectively, while deposit interest
        expense
        increased $2.6 million and $5.2 million in the three and six month periods,
        respectively, all the result of rising interest rates and the continued growth
        of account balances.  The annual average balance for loans was $776.8
        million at June 30, 2007 with an annualized average yield of 8.20% compared
        to
        $626.0 million at June 30, 2006 with an annualized average yield of
        7.92%.  Interest-bearing deposits had an annual average balance of
        $744.1 million with an annualized average rate of 4.24% at June 30, 2007
        compared to $600.0 million and 3.52% at June 30, 2006.  Other
        contributing factors during both the three and six month periods included
        increases in interest income on investment securities, increases in interest
        expense on other borrowings, securities sold under repurchase agreements
        and
        subordinated debentures, all the result of higher interest rates.
 
 The
        Company’s net interest margin for the three and six months ended June 30, 2007
        was 3.58% and 3.59% respectively as compared to 3.84% for both the three
        and six
        months ended June 30, 2006.  The rate for earning assets increased 25
        basis points and 36 basis points for the three and six month periods,
        respectively, with higher average yields on loans and federal funds sold
        accounting for most of the increase.  The cost to fund earning assets
        increased 53 basis points and 65 basis points for the three and six month
        periods, respectively, primarily due to higher rates on deposits, securities
        sold under repurchase agreements, and subordinated debentures.
 
 Noninterest
        Income
 **Table
                    5 - Noninterest Income****Three
                    Months Ended**
                
                
                
                
                
                
                
                
                **Six
                    Months Ended****June
                    30,**
                
                
                **Variance**
                
                
                **June
                    30,**
                
                
                **Variance****2007**
                
                
                **2006**
                
                
                **Amount**
                
                
                **%**
                
                
                **2007**
                
                
                **2006**
                
                
                **Amount**
                
                
                **%****(Dollars
                    in thousands)**
                
                
                **(Dollars
                    in thousands)**Service
                    charges and fees on deposits
                
                $
                1,581
                
                
                $
                1,540
                
                
                $
                41
                
                
                
                2.7
                %
                
                $
                2,978
                
                
                $
                2,892
                
                
                $
                86
                
                
                
                3.0
                %Gain
                    on sales of loans
                
                
                1,320
                
                
                
                1,271
                
                
                
                49
                
                
                
                3.9
                %
                
                
                2,605
                
                
                
                2,525
                
                
                
                80
                
                
                
                3.2
                %Investment
                    securities (losses) gains, net
                
                
                -
                
                
                
                284
                
                
                
                (284
                )
                
                N/A
                
                
                
                33
                
                
                
                284
                
                
                
                (251
                )
                
                N/ARetail
                    investment income
                
                
                275
                
                
                
                216
                
                
                
                59
                
                
                
                27.3
                %
                
                
                598
                
                
                
                384
                
                
                
                214
                
                
                
                55.7
                %Trust
                    services fees
                
                
                285
                
                
                
                198
                
                
                
                87
                
                
                
                43.9
                %
                
                
                558
                
                
                
                391
                
                
                
                167
                
                
                
                42.7
                %Increase
                    in cash surrender value of bank-owned life insurance
                
                
                161
                
                
                
                150
                
                
                
                11
                
                
                
                7.3
                %
                
                
                326
                
                
                
                289
                
                
                
                37
                
                
                
                12.8
                %Miscellaneous
                    income
                
                
                162
                
                
                
                147
                
                
                
                15
                
                
                
                10.2
                %
                
                
                329
                
                
                
                296
                
                
                
                33
                
                
                
                11.1
                %Total
                    noninterest income
                
                $
                3,784
                
                
                $
                3,806
                
                
                $
                (22
                )
                
                
                (0.6
                %)
                
                $
                7,427
                
                
                $
                7,061
                
                
                $
                366
                
                
                
                5.2
                %
 15
 *Index*
 
 Noninterest
        income decreased $22,000 (0.6%) during the three-month period and increased
        $366,000 (5.2%) during the six-month period.  The most significant
        changes for the three and six month periods were increases in retail investment
        income, trust income somewhat offset by a decrease in net investment securities
        gains.  Decreases in net investment securities gains for both the
        three and six month periods were the result of a $526,000 gain recognized
        on the
        sale of equity securities, partially offset by losses on the sale of agency
        securities in second quarter 2006.  The increase in retail investment
        income is primarily due to broker production increases.  The increase
        in trust income is primarily due to volume growth.  Increases in cash
        surrender value of bank owned life insurance was primarily due to the purchase
        of additional policies in February 2006 and increases in interest
        rates.
 
 Noninterest
        Expense
 **Table
                    6 - Noninterest Expense****Three
                    Months Ended**
                
                
                
                
                
                
                
                
                **Six
                    Months Ended****June
                    30,**
                
                
                **Variance**
                
                
                **June
                    30,**
                
                
                **Variance****2007**
                
                
                **2006**
                
                
                **Amount**
                
                
                **%**
                
                
                **2007**
                
                
                **2006**
                
                
                **Amount**
                
                
                **%****(Dollars
                    in thousands)**
                
                **(Dollars
                    in thousands)**Salaries
                    and other personnel expense
                
                $
                4,628
                
                
                $
                4,505
                
                
                $
                123
                
                
                
                2.7
                %
                
                $
                9,424
                
                
                $
                8,945
                
                
                $
                479
                
                
                
                5.4
                %Occupancy
                    expenses
                
                
                743
                
                
                
                685
                
                
                
                58
                
                
                
                8.5
                %
                
                
                1,503
                
                
                
                1,434
                
                
                
                69
                
                
                
                4.8
                %Other
                    operating expenses
                
                
                2,223
                
                
                
                2,042
                
                
                
                181
                
                
                
                8.9
                %
                
                
                4,490
                
                
                
                4,019
                
                
                
                471
                
                
                
                11.7
                %Total
                    noninterest expense
                
                $
                7,594
                
                
                $
                7,232
                
                
                $
                362
                
                
                
                5.0
                %
                
                $
                15,417
                
                
                $
                14,398
                
                
                $
                1,019
                
                
                
                7.1
                %
 Noninterest
        expense increased $362,000 (5.0%) during the three-month period and $1.0
        million
        (7.1%) during the six-month period.  Salary expense increased during
        the three and six month periods primarily due to opening of Southern Bank
        and
        Trust in Aiken, South Carolina, new personnel due to continued company growth
        and expansion of the wealth management area, somewhat offset by an increase
        in
        the deferral of loan production expense in compliance with SFAS No.
        91.  Increases in employee benefits during the three and six month
        periods were for FICA taxes, medical expenses, and employer 401K contributions
        directly related to salaries.  Increases for occupancy expenses during
        the three and six month periods were primarily from increases related to
        opening
        Southern Bank and Trust.  Additionally, rent expense increased for
        leased property for ATM’s and parking.  Property taxes increased due
        to the opening of two branch offices at GB&T and the opening of
        SB&T.  Depreciation expense increased primarily due to the opening
        of Southern Bank & Trust somewhat offset by a decrease due to the Company’s
        core hardware and software systems, which became fully depreciated by the
        end of
        the second quarter of 2006.  Other operating expenses increased
        $181,000 (8.9%) for the three-month period and $471,000 (11.7%) for the
        six-month period.  Increases in processing expenses during both the
        three and six month periods were attributable to new account growth for both
        retail and business checking products and retail investment processing fees
        related to increased production.  Marketing expenses increased
        primarily due to Southern Bank and Trust.  Contributions decreased for
        both the three and six month periods as the result of a $200,000 donation
        made
        to Georgia Bank Foundation in June 2006.  Increases in IT maintenance
        expense during the three and six month periods were due primarily to additional
        costs in software maintenance for Southern Bank and Trust and Georgia Bank
        and
        Trust, and installation and upgrade expense increased primarily from computer
        upgrades and Merchant Capture.  Professional fees increased for the
        six-month period due to Southern Bank & Trust’s external audit expense,
        trust advisory fees due to increased production, somewhat offset by a decrease
        in consulting fees related to state training tax credits and to the opening
        of
        Southern Bank and Trust.
 
 16
 *Index*
 
 Income
        Taxes
 
 Income
        tax expense in the second quarter of 2007 totaled $1.7 million, an increase
        of
        $43,000 (2.7%) over the second quarter of 2006.  The effective tax
        rate for the three months ended June 30, 2007 and 2006 was 36.1% and 35.8%,
        respectively.  Income tax expense for the six months ended June 30,
        2007 totaled $3.2 million for an effective tax rate of 35.9% compared to
        33.7%
        for the six months ended June 30, 2006.  The increase in the effective
        tax rate for both the three and six month periods is primarily due to lower
        nontaxable interest income and an increase in the federal tax rate due to
        anticipated higher income for the year.
 
 Asset
        Quality
 
 Table
        7
        which follows shows the current and prior period amounts of non-performing
        assets.  Non-performing assets were $3.4 million at June 30, 2007,
        compared to $2.4 million at December 31, 2006 and $3.2 million at June 30,
        2006.  Significant changes from December 2006 to June 2007 include a
        $293,000 increase in other real estate owned,  a $37,000 decrease in
        non-performing assets with balances less than $100,000, a $60,000 decrease
        for
        customers with balances greater than $100,000, and a $864,000 increase for
        one
        customer added to nonaccrual status.  The ratio of non-performing
        assets to total loans and other real estate was 0.38% at June 30, 2007, compared
        to 0.31% at December 31, 2006 and 0.48% at June 30, 2006.  The control
        and monitoring of non-performing assets continues to be a priority of
        management.
 
 There
        were no loans past due 90 days or more and still accruing at June 30, 2007,
        December 31, 2006 and June 30, 2006.
 
 17
 *Index*
  **Table
                    7 - Non-Performing Assets****(Dollars
                    in thousands)**June
                    30, 2007
                
                
                December
                    31, 2006
                
                
                June
                    30, 2006Nonaccrual
                    loans
                
                $
                3,118
                
                
                $
                2,351
                
                
                $
                3,185Other
                    real estate owned
                
                
                293
                
                
                
                -
                
                
                
                -Total
                    non-performing assets
                
                $
                3,411
                
                
                $
                2,351
                
                
                $
                3,185Loans
                    past due 90 days or more  and still accruing
                    interest
                
                $
                -
                
                
                $
                -
                
                
                $
                -Total
                    non-performing assets to total loans and other real estate
                    owned
                
                
                0.38
                %
                
                
                0.31
                %
                
                
                0.48
                %
  Allowance
        for Loan Losses
 
 The
        allowance for loan losses represents an allocation for probable incurred
        loan
        losses in the loan portfolio.  The adequacy of the allowance for loan
        losses is evaluated periodically based on a review of all significant loans,
        with particular emphasis on impaired, non-accruing, past due, and other loans
        that management believes require special attention.  The determination
        of the allowance for loan losses is considered a critical accounting estimate
        of
        the Company.  See “Critical Accounting Estimates.”
 
 When
        reviewing the allowance for loan losses, it is important to understand to
        whom
        the Company lends.  The following table sets forth the composition of
        the Company’s loan portfolio as of June 30, 2007 and December 31,
        2006.
 
 18
 *Index*
  **Table
                    8 - Loan Portfolio Composition****June
                    30, 2007**
                
                
                **December
                    31, 2006****Amount**
                
                
                **%**
                
                
                **Amount**
                
                
                **%*****(Dollars
                    in thousands)***Commercial
                    financial and agricultural
                
                $
                87,971
                
                
                
                10.87
                %
                
                $
                80,823
                
                
                
                10.78
                %Real
                    estateCommercial
                
                
                213,794
                
                
                
                26.41
                %
                
                
                198,453
                
                
                
                26.46
                %Residential
                
                
                173,482
                
                
                
                21.43
                %
                
                
                158,543
                
                
                
                21.14
                %Residential
                    held for sale
                
                
                11,890
                
                
                
                1.47
                %
                
                
                14,857
                
                
                
                1.98
                %Construction
                    anddevelopment
                
                
                292,880
                
                
                
                36.18
                %
                
                
                266,875
                
                
                
                35.58
                %Total
                    real estate
                
                
                692,046
                
                
                
                85.48
                %
                
                
                638,728
                
                
                
                85.17
                %Lease
                    financing
                
                
                34
                
                
                
                0.00
                %
                
                
                116
                
                
                
                0.02
                %ConsumerDirect
                
                
                24,544
                
                
                
                3.03
                %
                
                
                24,146
                
                
                
                3.22
                %Indirect
                
                
                5,232
                
                
                
                0.65
                %
                
                
                6,232
                
                
                
                0.83
                %Revolving
                
                
                809
                
                
                
                0.10
                %
                
                
                843
                
                
                
                0.11
                %Total
                    consumer
                
                
                30,585
                
                
                
                3.78
                %
                
                
                31,221
                
                
                
                4.16
                %Deferred
                    loan origination fees
                
                
                (1,040
                )
                
                
                -0.13
                %
                
                
                (919
                )
                
                
                -0.12
                %Total
                
                
                809,596
                
                
                
                100.00
                %
                
                $
                749,969
                
                
                
                100.00
                %
  At
        June
        30, 2007, the loan portfolio is comprised of 85.48% real estate
        loans.  Commercial, financial and agricultural loans comprise 10.87%,
        and consumer loans comprise 3.78% of the portfolio.
 
 While
        the
        Company has 85.48% of its loan portfolio composed of real estate loans, this
        percentage is not significantly higher than in previous
        years.  Commercial real estate comprises 26.41% of the loan portfolio
        and is approximately half owner occupied properties where the operations
        of the
        commercial entity provide the necessary cash flow to service the
        debt.  For this portion of real estate loan portfolio, repayment is
        not dependent upon the sale of the real estate held as
        collateral.  Construction and development (36.18%) has been an
        increasingly important portion of the real estate loan portfolio.  The
        Company carefully monitors the loans in this category since the repayment
        of
        these loans is generally dependent upon the sale of the real estate in the
        normal course of business and can be impacted by national and local economic
        conditions.  The residential category, 21.43% of the portfolio,
        represents those loans that the Company chooses to maintain in its portfolio
        rather than selling into the secondary market for marketing and competitive
        reasons and commercial loans secured by residential real estate.  The
        residential held for sale category, 1.47% of the portfolio, comprises loans
        that
        are in the process of being sold into the secondary market.  In these
        loans, the credit has been approved by the investor and the interest rate
        locked
        so that the Company minimizes credit and interest rate risk with respect
        to
        these loans.
 
 The
        Company has no large loan concentrations to individual
        borrowers.  Unsecured loans at June 30, 2007 were $12.5
        million.  While management uses available information to recognize
        losses on loans, future additions to the allowance may be necessary based
        on
        changes in economic conditions.  In addition, various regulatory
        agencies, as an integral part of their examination process, periodically
        review
        the Company’s allowance for loan losses.  Such agencies may advise
        additions to the allowance based on their judgments about information available
        to them at the time of their examination.  Such regulatory guidance is
        considered, and the Company may recognize additions to the allowance as a
        result.
 
 19
 *Index*
 
 Additions
        to the allowance for loan losses are made periodically to maintain the allowance
        at an appropriate level based upon management’s analysis of potential risk in
        the loan portfolio.  Loans determined to be uncollectible are charged
        to the allowance for loan losses and subsequent recoveries are added to the
        allowance.  A provision for losses in the amount of $1,030,000 was
        charged to expense for the quarter ended June 30, 2007 compared to $456,000
        for
        the quarter ended June 30, 2006, and $1,606,000 for the six months ended
        June
        30, 2007 compared to $960,000 for the six months ended June 30,
        2006.  The increase in provision for loan losses for both three and
        six month periods is primarily due to the provision related to overall loan
        growth, including the new Thrift’s loan portfolio, and an increase in
        classified/watch loans.  The increase in the allowance for loan losses
        as of June 30, 2007 as compared to June 30, 2006 is primarily due to increases
        in outstanding loan balances, increases in the allowance applicable to specific
        loans, and increases to the allowance due to higher levels of Classified
        and
        Watch-rated debt.
  **Table
                    9 - Allowance for Loan Losses**2007
                
                
                2006Beginning
                    balance, January 1
                
                $
                9,777
                
                
                $
                9,125Effects
                    of SAB 108
                
                
                -
                
                
                $
                (694
                )Provision
                    charged to expense
                
                
                1,605
                
                
                
                504Recoveries
                
                
                413
                
                
                
                259Loans
                    charged off
                
                
                (662
                )
                
                
                (418
                )Ending
                    balance, June 30
                
                $
                11,133
                
                
                $
                8,776
  At
        June
        30, 2007 the ratio of allowance for loan losses to total loans was 1.37%
        compared to 1.30% at December 31, 2006 and 1.31% at June 30,
        2006.  Management considers the current allowance for loan losses
        appropriate based upon its analysis of the potential risk in the portfolio,
        although there can be no assurance that the assumptions underlying such analysis
        will continue to be correct.
 
 20
 *Index*
 
 Liquidity
        and Capital Resources
 
 The
        Company’s liquidity remains adequate to meet operating and loan funding
        requirements.  The loan to deposit ratio at June 30, 2007 was 90.1%
        compared to 93.5% at December 31, 2006 and 90.3% at June 30,
        2006.  The decrease in the loan to deposit ratio from December 31,
        2006 to June 30, 2007 reflects deposit growth at a higher rate than loan
        growth
        during the first six months of 2007.  The increase in the loan to
        deposit ratio from June 30, 2006 to December 31, 2006 reflects loan growth
        at a
        higher rate than deposit growth during that time period.  Deposits at
        June 30, 2007 and December 31, 2006 include $76.2 million and $67.4 million
        of
        brokered certificates of deposit, respectively.  GB&T has also
        utilized borrowings from the Federal Home Loan Bank.  GB&T
        maintains a line of credit with the Federal Home Loan Bank approximating
        10% of
        GB&T’s total assets.  Federal Home Loan Bank advances are
        collateralized by eligible first mortgage loans, commercial real estate loans
        and investment securities.  These borrowings totaled $55.0 million at
        June 30, 2007.  GB&T maintains repurchase lines of credit with
        SunTrust Robinson Humphrey, Atlanta, Georgia, for advances up to $20.0 million
        and with The Bankers Bank, Atlanta, Georgia, for advances up to $10.0
        million.  At June 30, 2007, $10.0 million was outstanding with
        SunTrust Robinson Humphrey.  GB&T has a federal funds purchased
        accommodation with The Bankers Bank, Atlanta, Georgia, for advances up to
        $16.7
        million and with SunTrust Bank, Atlanta, Georgia for advances up to $10.0
        million, while SB&T has a federal funds purchased accommodation with The
        Bankers Bank, Atlanta, Georgia, for advances up to $3.3
        million.  Additionally, liquidity needs can be satisfied by the
        structuring of the maturities of investment securities and the pricing and
        maturities on loans and deposits offered to customers.  The Company
        also uses retail securities sold under repurchase agreements to fund
        growth.  Retail securities sold under repurchase agreements were $59.6
        million at June 30, 2007.
 
 Shareholders’
        equity to total assets was 7.22% at June 30, 2007 compared to 7.58% at December
        31, 2006 and 7.07% at June 30, 2006.  Stockholders’ equity as of June
        30, 2007 includes proceeds of $5.0 million from a private placement stock
        offering held during the third and fourth quarters of 2006.  The
        capital of the Company exceeded all required regulatory guidelines at June
        30,
        2007.  The Company’s Tier 1 risk-based, total risk-based and leverage
        capital ratios were 12.24%, 13.51%, and 9.44%, respectively, at June 30,
        2007.  The following table reflects the current regulatory capital
        levels in more detail, including comparisons to the regulatory
        minimums.
 
 21
 *Index*
 
 **Table
                    10 - Regulatory Capital Requirements****June
                    30, 2007***(Dollars
                    in Thousands)*Actual
                
                
                Required
                    for capital
                  adequacy
                    purposes
                
                
                ExcessAmount
                
                
                Percent
                
                
                Amount
                
                
                Percent
                
                
                Amount
                
                
                Percent**Southeastern
                    Bank Financial Corporation**Risk-based
                    capital:Tier
                    1 capital
                
                $
                104,934
                
                
                
                12.24
                %
                
                
                34,305
                
                
                
                4.00
                %
                
                
                70,629
                
                
                
                8.24
                %Total
                    capital
                
                
                115,836
                
                
                
                13.51
                %
                
                
                68,609
                
                
                
                8.00
                %
                
                
                47,227
                
                
                
                5.51
                %Tier
                    1 leverage ratio
                
                
                104,934
                
                
                
                9.44
                %
                
                
                44,474
                
                
                
                4.00
                %
                
                
                60,460
                
                
                
                5.44
                %**Georgia
                    Bank & Trust Company**Risk-based
                    capital:Tier
                    1 capital
                
                $
                81,288
                
                
                
                9.81
                %
                
                
                33,151
                
                
                
                4.00
                %
                
                
                48,137
                
                
                
                5.81
                %Total
                    capital
                
                
                91,648
                
                
                
                11.06
                %
                
                
                66,302
                
                
                
                8.00
                %
                
                
                25,346
                
                
                
                3.06
                %Tier
                    1 leverage ratio
                
                
                81,288
                
                
                
                7.75
                %
                
                
                41,962
                
                
                
                4.00
                %
                
                
                39,326
                
                
                
                3.75
                %**Southern
                    Bank & Trust**Risk-based
                    capital:Tier
                    1 capital
                
                $
                14,219
                
                
                
                24.69
                %
                
                
                2,304
                
                
                
                4.00
                %
                
                
                11,915
                
                
                
                20.69
                %Total
                    capital
                
                
                14,926
                
                
                
                25.92
                %
                
                
                4,607
                
                
                
                8.00
                %
                
                
                10,319
                
                
                
                17.92
                %Tier
                    1 leverage ratio
                
                
                14,219
                
                
                
                25.45
                %
                
                
                2,235
                
                
                
                4.00
                %
                
                
                11,984
                
                
                
                21.45
                %
  Management
        is not aware of any events or uncertainties that are reasonably likely to
        have a
        material effect on the Company’s liquidity, capital resources or
        operations.
 
 Commitments
        and Contractual Obligations
 
 The
        Company is a party to lines of credit with off-balance sheet risk in the
        normal
        course of business to meet the financing needs of its
        customers.  Lines of credit are unfunded commitments to extend
        credit.  These instruments involve, in varying degrees, exposure to
        credit and interest rate risk in excess of the amounts recognized in the
        financial statements.  The Company’s exposure to credit loss in the
        event of nonperformance by the other party to the financial instrument for
        unfunded commitments to extend credit and letters of credit is represented
        by
        the contractual amount of those instruments.  The Company evaluates
        construction and acquisition and development loans for the percentage completed
        before extending additional credit.  The Company follows the same
        credit policies in making commitments and contractual obligations as it does
        for
        on-balance sheet instruments.
 
 22
 *Index*
 
 Unfunded
        commitments to extend credit where contract amounts represent potential credit
        risk totaled $197.9 million at June 30, 2007.  These commitments are
        primarily at variable interest rates.
 
 The
        Company’s commitments are funded through internal funding sources of scheduled
        repayments of loans and sales and maturities of investment securities available
        for sale or external funding sources through acceptance of deposits from
        customers or borrowings from other financial institutions.
 
 The
        following table is a summary of the Company’s commitments to extend credit,
        commitments under contractual leases as well as the Company’s contractual
        obligations, consisting of deposits, FHLB advances, which are subject to
        early
        termination options, and borrowed funds by contractual maturity
        date.
  **Table
                    11 - Commitments and Contractual Obligations**
                  **($
                    in thousands)**
                
                **Less
                    than 1 Year**
                
                
                **1
                    - 3 Years**
                
                
                **3
                    - 5 Years**
                
                
                **More
                    than 5 Years**Lines
                    of credit
                
                $
                197,926
                
                
                
                -
                
                
                
                -
                
                
                
                -Mortgage
                    loan commitments
                
                $
                10,548
                
                
                
                -
                
                
                
                -
                
                
                
                -Lease
                    agreements
                
                
                151
                
                
                
                206
                
                
                
                151
                
                
                
                149Deposits
                
                
                847,781
                
                
                
                42,849
                
                
                
                6,427
                
                
                
                1,054Securities
                    sold under repurchase agreements
                
                
                59,581
                
                
                
                -
                
                
                
                -
                
                
                
                -FHLB
                    advances
                
                
                -
                
                
                
                12,000
                
                
                
                18,000
                
                
                
                25,000Other
                    borrowings
                
                
                1,000
                
                
                
                -
                
                
                
                -
                
                
                
                -Subordinated
                    debentures
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                20,000Total
                    commitments and contractual obligations
                
                $
                1,116,987
                
                
                $
                55,055
                
                
                $
                24,578
                
                
                $
                46,203
  Although
        management regularly monitors the balance of outstanding commitments to fund
        loans to ensure funding availability should the need arise, management believes
        that the risk of all customers fully drawing on all these lines of credit
        at the
        same time is remote.
 
 Effects
        of Inflation and Changing Prices
 
 Inflation
        generally increases the cost of funds and operating overhead, and to the
        extent
        loans and other assets bear variable rates, the yields on such
        assets.  Unlike most industrial companies, virtually all of the assets
        and liabilities of a financial institution are monetary in nature.  As
        a result, interest rates generally have a more significant impact on the
        performance of a financial institution than the effects of general levels
        of
        inflation.  Although interest rates do not necessarily move in the
        same direction and to the same extent as the prices of goods and services,
        increases in inflation generally have resulted in increased interest
        rates.  In addition, inflation can increase a financial institution's
        cost of goods and services purchased, the cost of salaries and benefits,
        occupancy expense and similar items.  Inflation and related increases
        in interest rates generally decrease the market value of investments and
        loans
        held and may adversely affect liquidity, earnings, and stockholders'
        equity.  Mortgage originations and refinancings tend to slow as
        interest rates increase, and can reduce the Company's earnings from such
        activities and the income from the sale of residential mortgage loans in
        the
        secondary market.
 
 23
 *Index*
 
 **Item
        3.  Quantitative and Qualitative Disclosures About Market
        Risk**
 
 As
        of
        June 30, 2007, there were no substantial changes in the interest rate
        sensitivity analysis or the sensitivity of market value of portfolio equity
        for
        various changes in interest rates calculated as of December 31,
        2006.  The foregoing disclosures related to the market risk of the
        Company should be read in conjunction with the Company’s audited consolidated
        financial statements, related notes and management’s discussion and analysis of
        financial condition and results of operations for the year ended December
        31,
        2006 included in the Company’s 2006 Annual Report on Form 10-K.
 
 **Item
        4.  Controls and Procedures**
 
 As
        of the
        end of the period covered by this report, the Company carried out an evaluation,
        under the supervision and with the participation of the Company’s management,
        including the Company’s President and Chief Executive Officer (principal
        executive officer) and its Group Vice President and Chief Financial Officer
        (principal financial officer), of the effectiveness of the design and operation
        of the Company’s disclosure controls and procedures pursuant to Exchange Act
        Rule 13a-15.  Based upon that evaluation, such officers concluded that
        the Company’s disclosure controls and procedures are effective in timely
        alerting them to material information relating to the Company (including
        its
        consolidated subsidiaries) that is required to be included in the Company’s
        periodic filings with the Securities and Exchange Commission.  There
        have been no changes in the Company’s internal controls or, to the Company’s
        knowledge, in other factors during the quarter covered by this report that
        have
        materially affected, or are reasonably likely to materially affect, the
        Company’s internal controls over financial reporting.
 
 24
 *Index*
 
 **Part
        II**
 **OTHER
        INFORMATION**
 
 
 **Item
                  1.**
              **Legal
                  Proceedings**
 
 There
        are
        no material pending legal proceedings to which the Company or any of its
        subsidiaries is a party or of which any of their property is
        subject.
 
 **Item
                  1A.**
              **Risk
                  Factors**
 
 In
        addition to the other information set forth in this report, you should carefully
        consider the factors discussed in Part I, “Item 1A. Risk Factors” in the
        Company’s Annual Report on Form 10-K for the year ended December 31, 2006, which
        could materially affect its business, financial condition or future results.
        The
        risks described in the Annual Report on Form 10-K are not the only risks
        facing
        the Company.  Additional risks and uncertainties not currently known
        to management or that management currently deems to be immaterial also may
        materially adversely affect the Company’s business, financial condition and/or
        operating results.
 
 **Item
                  2.**
              **Unregistered
                  Sales of Equity Securities and Use of
                  Proceeds**
 
 **Issuer
        Purchases of Equity Securities**
 
 The
        following table sets forth information regarding the Company’s purchases of its
        common stock on a monthly basis during the second quarter of 2007.  Of
        the 780 shares repurchased during the second quarter, 180 were privately
        negotiated and 600 were made in the open market.
 
 **Period**
                **Total
                    Number of Shares Purchased**
                **Average
                    Price Paid Per Share**
                **Total
                    Number of Shares (or Units) Purchased as Part of Publicly Announced
                    Plans
                    or Programs**
                **Maximum
                    Number (or Appropriate Dollar Value) of Shares (or Units) Yet
                    Be Purchased
                    Under the Plans or Programs**April
                    1 throughApril
                    30, 2007
                -
                -
                4,899
                95,101May
                    1 throughMay
                    31, 2007
                180
                38.49
                5,079
                94,921June
                    1 throughJune
                    30, 2007
                600
                35.92
                5,679
                94,321Total
                780
                $36.51
                5,679
                94,321
 
 25
 *Index*
 
 On
        April
        15, 2004, the Company announced the commencement of a stock repurchase program,
        pursuant to which it will, from time to time, repurchase up to 100,000 shares
        of
        its outstanding stock.  The program does not have a stated expiration
        date.  No stock repurchase programs were terminated during the second
        quarter of 2007.
  **Item
                  3.**
              **Defaults
                  Upon Senior Securities**
 
 Not
        applicable
 
 **Item
                  4.**
              **Submission
                  of Matters to a Vote of Security
                  Holders**
 
 (a)
              The
                  Annual Meeting of Shareholders was held on April 25, 2007 at the
                  Company’s
                  Cotton Exchange office located at 32 8th
                  Street,
                  Augusta, Georgia.
 
 (b)
              The
                  following directors were elected for a term of one year and until
                  a
                  successor is duly qualified and
                  elected:
 
 William
        J. Badger
 R.
        Daniel
        Blanton
 Warren
        Daniel
 Edward
        G.
        Meybohm
 Robert
        W.
        Pollard, Jr.
 Larry
        S.
        Prather, Sr.
 Randolph
        R. Smith
 Ronald
        L.
        Thigpen
 John
        W.
        Trulock, Jr.
 
 (c)
              The
                  following matters were voted on at the meeting as was previously
                  identified in the Proxy materials forwarded to each
                  shareholder:
 
 1.
              Proposal
                  to elect the nine individuals nominated by management as
                  Directors.
 
 Votes
        were cast as follows:
 
 Director
              
              For
              
              WithholdWilliam
                  J. Badger
              
              4,866,335
              
              0R.
                  Daniel Blanton
              
              4,862,835
              
              3,500Warren
                  Daniel
              
              4,866,335
              
              0Edward
                  G. Meybohm
              
              4,866,335
              
              0Robert
                  W. Pollard, Jr.
              
              4,862,835
              
              3,500Larry
                  S. Prather, Sr.
              
              4,866,335
              
              0Randolph
                  R. Smith, M.D.
              
              4,862,835
              
              3,500Ronald
                  L. Thigpen
              
              4,862,835
              
              3,500John
                  W. Trulock, Jr.
              
              4,866,335
              
              0
  26
 *Index*
 
 **Item
                  5.**
              **Other
                  Information**
 
 None
 
 **Item
                  6.**
              **Exhibits**
 
 31.1
              Certification
                  of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002.
 
 31.2
              Certification
                  of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002.
 
 32.1
              Certification
                  of Chief Executive Officer and Chief Financial Officer Pursuant
                  to Section
                  906 of the Sarbanes-Oxley Act of
                  2002.
 
 27
 *Index*
 
 SOUTHEASTERN
        BANK FINANCIAL CORPORATION
 Form
        10-Q
        Signatures
 
 
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, the registrant
        caused this report to be signed on its behalf by the undersigned, thereunto
        duly
        authorized.
 
 
 SOUTHEASTERN
                BANK FINANCIAL CORPORATIONDate:
              August
                  9, 2007
              
              By:
              /s/
                  Darrell R. RainsDarrell
                R. RainsGroup
                  Vice President, Chief Financial Officer
                (Duly
                  Authorized Officer of Registrant and Principal Financial
                  Officer)
   28